Azorean Palace in the Clouds

Atop a dormant volcano in the Azores, the remnants of the abandoned Monte Palace Hotel slowly disappear behind vegetation. In the late 1980s this hotel was the culmination of more than ten years of planning. It offered its guests top-shelf accommodations surrounded by million dollar views, but the business collapsed before its second operational birthday.

Natives know why the hotel struggled: the location is too remote, weather too unpredictable, tourism campaign too ineffectual, and there’s nothing else to do up there. It was probably all of the above, plus a healthy serving of developers exhausting financing and succumbing to enormous debt.

The hotel was designed to be purposefully unspectacular, its designers intending to blend the structure into the landscape while not detracting from the magnificent views offered by São Miguel’s Vista do Rei. Now it has been abandoned for years, and many feel the building detracts.

IATH & The French Hotels

(courtesy Jorge Loures)

Indústria Açoreana Turistico-Hoteleira S.A. (IATH) was a company composed of French and Belgian shareholders, founded in 1977 for the specific purpose of investing in the Azores. It planned to build two five-star hotels on Sao Miguel: Bahia Palace in Agua D’Alto and Monte Palace at Vista do Rei near Sete Cidades.

The construction contract was finalized at Ponta Delgada in December of 1977. The architects were Yves Roa and Olivier-Clément Cacoub – the latter a celebrated architect in Africa and Europe, known for being the chief architect of the civil buildings and national palaces and holding the post as Official Conservative of French Museums. Cacoub and Roa’s resume also included the five-star Tunisian Abou Nawas Tunis.

Guidelines for the architects were many; it was important to the Azorean residents that the buildings blend in with their surroundings and complement the landscape.

“#10: There must be a physical link between the building and the mountain to the east.”

“#30: Neutral colors should be used to make it possible to conceal the building in the landscape, and at all costs avoid the Hotel becoming a point of tension in the landscape.”

Work on the first of the two hotels – the 101-room Bahia Palace – was scheduled to begin in October of 1980, with the hotel opening in May of 1982. The original plan was to open Bahia Palace first, and if things were successful the company would open Monte Palace later.

The build site chosen for the second hotel was the Vista do Rei (View of the King), a picturesque alcove on a lip near the volcanic peak. Quite possibly one of the most stunning viewpoints in the world, Vista do Rei overlooks the beautiful Sete Cidades on one side and the Atlantic Ocean on the other.

Sete Cidades is set inside an eight-mile caldera that is also home to the Lagoa das Sete Cidades, which appears as two lakes: one blue (Lagoa Azul) and one green (Lagoa Verde).

According to legend, the lakes’ differing hues were the result of a princess and shepherd who wept tears of different colors over a forbidden love. Romance-hating scientists point out that it is actually one lake separated by a bow bridge, and the different colors are attributed to cyanobacteria blooms and an overabundance in development of rooted aquatic macrophytes and algae in the water bodies.

Whatever. The princess-and-shepherd version is easier to repeat to children, so that version has been the one passed down for centuries.

The rock that was replaced with the Monte Palace Hotel

The idea to build a hotel at Vista do Rei was gathering negative attention in the local community. “A hotel in the Sete Cidadescontinues to be challenged by some professionalsrelated to tourism and others; After asking if they believe in success after they are built, they simply say ‘no.'”

Construction of the Bahia Palace commenced in 1980 and was initially expected to be completed on May 28th, 1982. The total financial investment in the two hotels was scheduled to approach two million escudos (then-Portuguese currency). An investment by French engineering conglomerate Creusot-Loire earned the hotel projects the nicknames of “the French hotels” in the Azorean press.

Rocky Beginning

In 1982 an IATH Administrator announced the unfinished hotels will be completed – albeit after a delay – with a new opening date for the Bahia Palace expected to be closer to mid-1983.

Delays stemmed from the government’s request that IATH increase its capital investment in the project so there was more of a balance between public and private funds.

Also slowing progress was the rising interest rate environment, which increased IATH’s cost to borrow money. And throughout the 1980s, the Azorean tourism industry was still nascent, little more than a blip on the radar of most world travelers.

A guest room in the Monte Palace Hotel, circa 1980s

By January of 1984 there was hopeful progress in the construction of the Bahia Palace in Agua d’Alto. The project’s survivability again came under question when its financial backer, French industrial giant Creusot-Loire, was liquidated in June of 1984.

Then IATH Administrator Albano Manuel Neto de Viveinos, who had been with the company since 1977 and was a facilitator in the deal, left to perform similar duties for the Office of Azorean Tourism.

Local papers announced “the contracts are signed for two luxury hotels” (courtesy Jorge Loures)

IATH scrambled to procure additional financing, and it succeeded in securing another two million escudos from Portuguese banks Banco Nacional Ultramarino and Banco Pinto & Sotto Mayor. This capital injection allowed the first of the two five-star hotels to be completed; on August 6th, 1984, the Bahia Palace was officially opened.

Monte Palace, which was still under construction, would have to wait for its debut. An impasse that lasted from December of 1984 until March of 1985 prevented the developer from making progress on the second hotel. A February 1985 article attributed the standstill to a lack of communication between the developers and financiers of the project.

Particularly painful to IATH and the Bahia Palace was the cancelled NATO meeting in the Azores, which resulted in the loss of 600 planned rented beds and was a severe blow to the hotel’s bottom line. Meanwhile the cost to build the hotels had ballooned to double their estimate. Both would be financial failures and end up in the hands of the banks.

Closure of the Bahia Palace

The financial stalemate reached a boiling point in late March of 1985. If the banks and IATH would be unable to reach an agreement, the Bahia Palace would be forced to close. IATH International president Dr. Gozzi claimed the hotels would only open if their Madeiran financiers “stopped blocking the process.”

In November of 1985 the Bahia Palace Hotel closed for the rest of the year, with management announcing a re-opening in March of the following year. However the Bahia Palace Hotel would not re-open in 1986; a report in February of that year noted the hotel cancelled all reservations after the financial problems were not resolved during the break.

The banks behind the financing – Banco Nacional Ultramarino and Banco Pinto & Sotto Mayor – refused to comment. By the middle of 1986 the situation had become farcical. Newspaper headlines announced the hotels were the island’s “mockery of the century.”

In February of 1988 the creditors met with the hotel operators to diagnose the situation and attempt to determine a course of action. If no other solutions could be found, bankruptcy was a feared potential result. The outcome of the creditors’ meeting surprised many, revealing a stay of execution for the hotels for another two years.

During this time the hotels would reopen under controlled management and in accordance with an agreement. The accumulated debt to financiers Nacional Ultramarino and Pinto & Sotto Mayor had reached twelve million escudos; a re-structuring of ownership in the enterprise gave the banks shares of the company stock in exchange for forgiveness of some of the debt.

Grand (Re-) Openings

Monte Palace atrium as it appeared in the 1980s (courtesy Jorge Loures)

On April 15th, 1989, the Monte Palace finally opened its doors. At the same time the Bahia Palace in Agua d’Alto was re-opened for the first time in almost four years. Newspapers confirmed that the Bahia and Monte Palace Hotels were now open and finally contributing to the island’s economy; Monte Palace by itself employed more than 100 people.

When the Monte Palace opened the enterprise was in debt to the tune of twelve million escudos, which included both legacy debt from the ten year-old construction of Bahia Palace, and the new debt used to finish Monte Palace and restore Bahia Palace. Such debt service was untenable for the fledgling hotels, who again flirted with collapse unless another outside investor could provide stability.

Then ESTA got involved with a fifteen-year agreement to manage the properties. ESTA is an acronym for a hotel management association comprised of companies with experience in tourism: Estoril Sol and TAP/Air Portugal. After ESTA had performed its due diligence, the group was less enthusiastic about the deal. According to ESTA administrator Dr. Carlos Beja, the hotels together presented “drama” with only the Bahia Palace being “viable in terms of hotels and markets.”

Monte Palace atrium as it appeared in the 1980s (courtesy Jorge Loures)

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Monte Palace Hotel

Monte Palace Hotel insignia

Sometimes incorrectly labeled the “first five-star hotel in the Azores,” the Monte Palace was actually the second (after Bahia Palace). By all accounts the Monte was the grander of the two structures, but its location frittered any hope for success.

The Monte Palace Hotel had 83 standard rooms, four luxury suites, and one presidential suite. Downstairs was a bar, a discotheque, and two restaurants. Also inside the hotel were three conference rooms, a bank, and a hairdresser. In the basement were the nightclub, stage, a service delivery entrance, and a series of tunnels. These combined to spread across a five-story, 507,000 square-meter complex.

Near the back of the lobby a large winding spiral staircase led visitors to their rooms, each of which (on sunny days) had spectacular views – one side of the hotel overlooked Sete Cidades and the other side the Atlantic Ocean. Rooms were tastefully adorned in various period colors and featured floor-to-ceiling glass windows with private balconies. Each was equipped with sitting furniture and televisions.

The restaurants were the Dom Carlos and the Grill Dona Amélia, while the American-styled bar was the D. Urraca, and the Nightclub was the Discoteca Chamarrita.

According to former employee Paulo Viveiros, “in the two restaurants there were silver cutlery, crystal glasses and embroidered cloth napkins,” and “the walls were lined with French fabric… It was a very luxurious hotel for the time. There was no parallel in the Azores.”

While Monte Palace beds were not a success with tourists, its restaurants and nightclub were popular with local residents.

Monte Palace atrium as it appeared in the 1980s (courtesy Jorge Loures)

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Grand (Re-) Closures

Results of 1990 meeting see Monte Palace closed by ESTA

By late 1990 the two hotels were again struggling with low occupancy and high costs. By itself the Monte Palace was losing 16,000 escudos per month. In November of 1990 ESTA followed through with Dr. Beja’s suggestion and announced it would close the struggling hotel.

The Monte Palace officially closed on November 26th, 1990. For all the time and money invested since 1977, the hotel had been open for just nineteen months.

Sister hotel Bahia Palace survived for just two more years before being closed by ESTA in 1992 after it faced similar traffic issues.

Monte Palace atrium, then and now

The Monte Palace never re-opened. For the next twenty years the hotel was occupied by a lone security guard accompanied by guard dogs. When the funding for security ran dry in 2010, the guard moved out and the hotel was quickly conquered by vandals.

In the mid-1990s, Madeiran investment company Grupo SA purchased the two hotels and promised to re-open them; however only the Bahia Palace was re-opened. It lost some amenities, was reduced a star, and was re-opened as a four-star hotel.

Monte Palace atrium, then and now

In 2005 the SIRAM Group – another investment company from Madeira – purchased the Monte Palace Hotel. Under SIRAM there was no redevelopment, and it was under the stewardship of SIRAM that funds used to pay the security guard disappeared in 2010.

Between 2012 and 2013 vandals destroyed many of the Monte Palace’s windows, and the broken glass began to pose a danger to tourist safety. Because the Vista do Rei remained a popular stop for visitors, authorities were forced to take action and remove all remaining glass.

This seemed to further encourage tourists to enter, with many taking souvenirs (such as this visitor who walked off with a binder of unpaid Monte Palace bills. Note: please don’t do this – take nothing but photos, leave nothing but footprints.)

Purgatory of Bank Ownership

In 2012 the Portuguese banking system was de-capitalized. Real estate investment groups who relied on that stream of liquidity were forced into bankruptcy, which sent properties and other non-financial assets back to the banks.

From 2012 until 2015 this was a disaster for the banks, who were forced to carry billions of dollars of illiquid, non-performing debt on their balance sheets.

An unfortunate participant in all this was the Monte Palace, which in March of 2012 was among the SIRAM Group assets sold to Banif to cover debts approaching two million dollars.

A little more than a year later, in May and July of 2013, the Monte Palace was confirmed to still be owned by Banco Banif. Banif offered no plans or timeline for the hotel.

The bar in the Monte Palace, then and now

And Banif was a bank, not a hotel operator. The lender had little interest in turning the hotel around. In August of 2015 a selling agent revealed the Monte Palace had been on the market for more than a month at an asking price of €380,350. Later that month a group of citizens petitioned the government to purchase the hotel and convert it into a public leisure area.

By the end of 2015 Banif Bank had collapsed for the second time in seven years. While the bank’s properties were acquired by Santander Group, Monte Palace landed under control of Oitante S.A., the private entity that acquired Banif’s non-financial assets.

Oitante reportedly paid a third of book value for the assets, which were then re-sold for whatever the market would yield. For the Monte Palace this meant another re-listing – this time in April of 2016 and with an asking price of €1.5 million. As of December 2016, the hotel appears to still be on the market.

Monte Palace: What Went Wrong

At first blush the idea to build a five-star hotel at Vista do Rei with sweeping views of the Atlantic Ocean and Sete Cidades sounds appealing, but as previous visitors have said in review: Don’t be fooled by the sunny photos used by the tourism authority.

The volcanic rim is too far removed from the city center, and about that weather: Vista do Rei sees more than 200 days of rain per year, while being ensconced in clouds for the majority of the Gregorian calendar.

High winds make it a bit chilly too, so swimsuits are out and it’s not a place guests are going to want to spend any meaningful amount of time in the outdoor loungers. Locals seem to understand this, and the joke goes that plans for the Monte Palace were conceived by a tourist who visited on a sunny day.

A conference room at the Monte Palace, then and now

Another issue was the state of the Azorean tourism industry, which at the time was still in its infancy. And despite being a five-star hotel, there was little for guests of the Monte Palace to do beyond enjoying the view, eating at the restaurants, and visiting the nightclub.

Absent were beach access, sunbathing, tennis courts, a golf course, or spa. There was no arcade, gym, or movie theater.

What the Monte did have, was expansive trails and stunning views, which made it an attractive stop for hikers and photographers.

A guest room in the Monte Palace Hotel, then and nowA guest room in the Monte Palace Hotel, then and now

Its isolation was a significant hurdle. The Monte Palace was fifteen-plus minutes up a long, winding road from Ponta Delgada. There were no nearby businesses, groceries, or shopping. This in turn forced guests to hire cars during their stay.

There were rumors the developers wanted to include a casino to attract a new class of tourist, however the government reportedly failed to authorize a permit.

Monte Palace Hotel Today

Until 2010 a security guard resided in the hotel, and with fairly limited means this person valiantly fought to slow its degradation. But the security guard was hired to secure, not fix. His budget and training didn’t allow for significant repairs, so when major things like the elevators and roof failed, they weren’t fixed.

For two decades moisture was the hotel’s main adversary. After 2010, trespassers and vandals joined the fray and have hastened its destruction. Even before then, there was evidence the hotel was losing its war with moisture. One group of authorized visitors reported seeing peeling wallpaper and feeling squishy carpets underfoot. The guard was ill-equipped for the fight; his fan was pointed at a small spot on the floor, but the roof was leaking water faster than the fan was drying the carpet.

Around the spiral staircase, carpet was beginning to show signs of being ripped up. In 2010 windows were intact, but they had accumulated a film of two decades’ worth of dirt.

When the SIRAM Group faced financial troubles in 2010, payments to the guard for the hotel ceased. Once the security guard departed, the hotel was relieved of its furniture, table lamps, mirrors, and rugs. Even the elevators and lighting fixtures were plucked from the structure, which was eventually stripped down to its concrete skeleton.

As a safety measure to protect visitors from broken glass, all windows were removed in 2012, which unfortunately only exacerbated the looting. After the thieves came the vandals, who took turns inscribing their important messages over hotel walls.

This before & after shows the deterioration of a Monte Palace corridor between 2009 (L, courtesy theo nuyts) and 2013 (R, source)

Today the once-great hotel is a shell of its former self. There are no documents, doors, or furniture left. The floor is covered in dust and debris. Vegetation is making its way inside, and mold has conquered walls not already defeated by graffiti.

In the summer of 2016 two artists visited the Monte Palace and repainted the atrium’s floor (courtesy Sara Pinheiro)

“It fascinated me the contrast of that colorful thing that comes from the floor with the abandoned gray places,” de Riba said. “It’s a thin coat of paint, which I do. A simple skin change that also changes the perception we have of space. The big challenge initially was to clean a ruined stone floor.” Looking up toward the leaking roof, he adds “then the fight was to keep it dry.”

In the summer of 2016 two artists visited the Monte Palace and repainted the atrium’s floor (courtesy Sara Pinheiro)

What about the sister hotel, the Bahia Palace? It is still open. Portugal’s Pestana Grouppurchased the hotel in September of 2014. As of the date of this article, a visit to HotelBahiaPalace.com redirects to a new hotel page under the Pestana Group parent website.

Thanks for the link Hamish, that’s helpful! I will scan through that site and see if there is anything I can work into an article. I would love to visit NZ, some of my family actually have a long term plan to move there. Besides the obvious beautiful countryside, one of the more appealing things about NZ to me is how far off the world’s radar it is. And more sheep than people. 😉

I was surprised at how much the atrium looked like a lower-key version of an Embassy Suite’s atrium. Also – I very much enjoyed your humor when talking about the two lake colors. You slipped it in without detracting from the tone of the piece.

Hi RL, good to hear from ya. Happy holidays. 🙂
Good observation, it does resemble the Embassy Suites style. I wonder if that was an inspiration for the designers?
Thanks for the feedback on the humor. I sometimes debate how much (if any) to include in the articles, so this was helpful. 😉

This is the first complete article about Monte Palace. Since visiting the hotel in august 2016 I am constantly searching articles and info about it. Thank you very much.
Do you have any idea why the video(s) posted by Jorge Loures are not available?

Thanks Ania, I appreciate the kind words. This one took some time because of significant translation work. My hunch is that obstacle contributed to the poor English coverage. Jorge Loures did a tremendous job on documenting the history, obviously none of this would have been known without him. His Monte Palace video is working for me at the moment, but I might have included a bad link somewhere. Which link were you clicking to reach his video? Thanks for reading!

As usual with you, this is a fascinating article backed up by careful research, with many striking pictures. Thank you. I was distracted for a long time by the need to learn more about the Azores, which are extremely interesting in themselves!

Cheers Stephen, I’m blushing. 😉 You know, this was a good exercise for me to brush up on my Azorean knowledge too. I learned it’s a beautiful place with some fascinating history. Visitor reviews are overwhelmingly positive.

The link to the Bahia Palace website is active. You can make reservations and I read several reviews from guests that are dated in just the past couple of months. It has a 91% rating. I thought from the article it was closed, too. But it isn’t.

This was an extremely interesting article. The first I’ve ever read on your site. Well done!

Apologies Marci, yes my wording was confusing on the Bahia Palace today. Thanks for bringing this to my attention, I’ve revised it to be more clear. And thanks for reading! I’m glad you stopped by and hope to see you again soon. 🙂

Yet another fascinating and well-researched article. It’s sobering, however, with yet another reminder of what you can end up with when “plans…[are] conceived by a tourist who visited on a sunny day”, and how it becomes someone else’s problem, I get very nervous about certain pipe-dreams that are threatening to come to fruition locally in very environmentally sensitive locations.

Thanks Colin. You’re right, many of these old buildings do become someone else’s problem. Hopefully nothing will be jeopardized if those pipe dreams actually appear. With regards to Monte Palace, maybe in the future someone will build a HAARP-like weather controlling station up there to burn off all the clouds. 😉 Thanks for the comment my friend.

Danke Ben! Those last two things could probably be entire posts on their own, and I don’t want to pretend what I said here was anywhere near complete. But I appreciate the kind words my friend, thanks for stopping by. 🙂

Where did the Windows and Doors go to? The workers with their trucks that came at night what did they do with everything they removed? What about the kitchen equipment… who has it? Why are there no pictures of the basement? Is there stil equipment downstairs? Has the commune cutoff water and electricity supplies?

All good questions LeGiGi. I don’t know the answers, but I would not be surprised if some of the bigger-ticket items found their way off the island somehow. If you consider how narrow the market on the island for things like elevators and commercial-grade kitchen appliances must be, this seems like it would make the most sense.

…Unless some nostalgic collector on the island is hiding an elevator in their living room. But I think the secret would get out if anyone did. 😉

Thanks for this great article!! I have been searching the web all over for more information on the Monte Palace. I couldn’t get this damn hotel out of my head after my recent visit. The whole story is so damn unbelievable! I mean how on earth could you do anything other that laugh at the idea of building a five start hotel up there?! Maybe I should start a crowd-funding project to raise money to buy the hotel, tear it down and convert the area into a camping site. I guess that would have been the only profitable accommodation for that spot.

Thanks for the comment ausreisserin. This was one of the more difficult places on which to find information, but I must acknowledge the hard work of Jorge Loures who took the time to assemble all the news articles.

Thanks for your detailed information about the ruin and its history. We detected it accidentially when we were on holidays on Sao Miguel in Sept/Oct 2017. It was a misty day and the ruin appered a bit spooky, but also really dismal. When I searched the interrnet, I found some rumours that the whole project was nothing but money laundery. This seems to be the only logic explanation why someone built such a hotel in this place at a time when tourism on the Azores was still underdeveloped and in its “wild West era”.

Although the construction once wasted a piece of nature, I’m not happy with the idea to tear it down and replace it with a camping site or something else. This would only worsen the situation. To me the best solution is just to leave the ruin as it is. Let nature recapture it as an artificial rock

You will find a gallery of my photos in the German forum Netzwerk Fotografie.